Health savings accounts spark consumer interest in first year
HSAs, HRAs and FSAs are making CDHPs effective solutions for rising health insurance costs.
The acronym alphabet soup of the managed care industry has employers and employees inquiring more about consumer-driven health plans such as health savings accounts, health reimbursement arrangements and flexible spending accounts.
Health insurance companies are launching various consumer plans to accommodate employers’ tastes, and HSAs are the latest ingredient.
Health savings accounts, signed into law Jan. 1, through the Medicare Prescription Drug, Improvement and Modernization Act, are the newest investment savings accounts President Bush has pushed in the past year. HSAs are set up in conjunction with high-deductible health plans and low monthly premiums and allow employees and their employers to set aside tax-deferred money for various medical expenses not covered by their insurance policies. HSAs can be rolled over year to year, and the employee can take the account from job to job.
The HSAs are doing extremely well in their first year, and the positive for employees is that it is their money and they can spend it how they want on medical services, said Kevin Gardner, an employee benefits specialist with Strategic Employee Benefits Services in Metairie. Gardner said 10 percent of the people he does business with use HSAs.
Health reimbursement arrangements are funded by employers only, typically combined with preferred provider organization plans with a high deductible, and can be used for health care expenses to be funded when money is needed. The HRAs typically cannot be carried over from job to job.
A flexible spending account is an IRS-regulated fund where employees can also set aside money for medical costs under a use it or lose it system. If at the end of the year the employee does not use money from the account, then he or she loses the amount. FSAs also stay with the company upon an employee’s termination.
About 14 percent of large employers plan to offer some form of consumer-driven health plan in 2005 while 26 percent are likely to offer one in 2006, according to a survey by New York-based Mercer Human Resource Consulting.
Companies are steering toward the consumer-driven plans because of annual premium increases. According to the Council of Insurance Agents and Brokers, headquartered in Washington, D.C., 40 percent of large employers, defined as those with 501 or more employees, reported an annual premium increase between 10 percent and 20 percent, while 64 percent of medium-sized businesses and 55 percent of small businesses reported a similar increase.
These plans have been popular for people looking for a break from the high premium, said Jeff Chicots, UnitedHealthcare vice president for the small business group in Alabama, Louisiana and Mississippi. We really try to educate our brokers about when and when not to recommend HSAs, and you’re going to see a lot more adoption of these accounts in January 2006 after the education sinks into consumers.
UnitedHealthcare has offered the iPlan HSA product since the beginning of the year and has 3,500 new HSA members, made up from 10 small business groups and 20 key accounts or large companies, which United Healthcare defines as businesses with 51 or more employees. Chicots said approximately 15 percent of their new business signs up for HSAs. On the national level, UnitedHealth Group forecasts more than 150,000 HSA participants by January 2005.
Since the beginning of the year, Blue Cross/Blue Shield has offered HSAs with its BlueSaver product. In Louisiana, BlueSaver individual membership stands at 55,000, while group membership is 11,000, both totaling a compounded annual growth rate of 82 percent in the past four years.
The HSA plans are arrows in the health insurance quiver, said John Maginnis, Blue Cross vice president of marketing and creative services. The HSA is a tax-deferred savings account like the 401(k) option, and it’s not the one solution to health care but it’s a solution people are embracing, he said.
Humana will roll out its individual HSA accounts in Louisiana in second quarter 2005 and then launch its employer product shortly thereafter. Louisiana President Hassan Rifaat said the HumanaOne HSA will incorporate many of the features found in its consumer-driven insurance products for large and small businesses.
These HSAs are an important development for the industry and small businesses. It’s another option of consumer-oriented plans where we engage the consumer in making the decision on health insurance options, said Rifaat. Consumer choice models are the best solutions to the health insurance problem in this state.
Humana partnered with JPMorgan Chase to administer the HSAs so the bank can provide customers with transaction services and a HumanaAccess Visa debit card allowing real-time access to contributed funds.
Coventry Healthcare of Louisiana has offered HRAs for two years and will offer HSAs at the beginning of 2005, along with five various high-deductible plans designed for small businesses.
Some people view the HSAs as a way to get back to single-digit rate premium increases because consumer plans are said to dampen the trend a bit, said Coventry New Orleans sales manager Carson Meehan. People need to look at it as a long-term opportunity for savings and get integrated in the actual costs.
Wayne Landwerlin, president of Group Insurance Associates in Metairie, said the breaking point for employers and employees interested in HSAs is premium differential or the amount the company will cover in the premium.
HSAs don’t work if there is very little differential in the premium; employees need to know the premium difference and go from there, Landwerlin said. Calculators and dollar signs can always make the best business decisions when it comes to health insurance.
Copyright 2004 Dolan Media Newswires
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